When you are a creative and enterprising individual with a lot of good ideas, you may hate sitting in a cubicle all day working for someone else. Starting a business is the dream of many Americans, but paperwork and legal structuring can seem overwhelming if you don’t know much about business law.
If you are a one-person operation or have a business partner, you may be tempted to set up your business as either a sole-proprietorship or as a partnership. These options are attractive because they are usually simpler to set up. But in today’s post, we’ll discuss why structuring your business as a limited liability company may be a smarter and safer move.
As the name suggests, an LLC limits the personal liability of its owner(s). The owners’ personal assets are protected from the business’ financial liabilities. If you run a sole-proprietorship and get sued or incur a huge debt, your personal money and assets could be fair game for creditors and others to whom the business owes money.
By establishing an LLC, you will not be held personally liable for lawsuits, debts and judgments against your business. This is advantageous for many types of business. But it is especially useful if:
- The nature of your business is dangerous (and you are therefore likely to get sued)
- Your business may incur large amounts of debt
- You own considerable personal assets and wealth that need to be shielded from business liability
LLCs offer the protections that you’d get with a company. At the same time, paying taxes on an LLC is usually less complicated than it is with a corporation. The owners of an LLC will include their business profits in their own personal tax returns.
No matter what kind of business you want to set up, trying to do it all yourself could increase the risk of costly mistakes. For this and other reasons, please consider seeking help from an experienced business law attorney.